Leung Wai Fong and Another v. Cho Li Yuen
Read the full judgment text of DCCJ 4222/2004 on BabelCite. This District Court judgment.
1. In this action, the 1 st and 2 nd Plaintiff are claiming against the Defendant as the administrator of the estate of Leung Wai Kwan, deceased for the sum of $255,029.34 as one of the three mortgagors and the 1/3 owner in a property registered in the Plaintiffs and the deceased’s names. The Plaintiffs are further claiming for contribution to the mortgage repayments at the rate of $2,768.92 per month until the mortgage is redeemed.
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DCCJ 4222/2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 4222 OF 2004 ------------------ BETWEEN
Coram : Her Honour Judge H.C. Wong in Court Date of Hearing : 30th June, 3rd to 4th July, 28th to 30th August 2006 Date of Handing Down Judgment : 26th October 2006 ______________________ JUDGMENT ______________________ 1.In this action, the 1st and 2nd Plaintiff are claiming against the Defendant as the administrator of the estate of Leung Wai Kwan, deceased for the sum of $255,029.34 as one of the three mortgagors and the 1/3 owner in a property registered in the Plaintiffs and the deceased’s names. The Plaintiffs are further claiming for contribution to the mortgage repayments at the rate of $2,768.92 per month until the mortgage is redeemed. 2.The Plaintiffs and the deceased were sisters. The Plaintiffs’ claim is based on an oral agreement entered on or about 7 May 1995 between the two Plaintiffs and the deceased to purchase a property at 25B, 438 Castle Peak Road, Kowloon (hereinafter referred to as “the property”). The Plaintiffs claim that the property was purchased for investment purpose at a purchase price of $1,885,300. The deposit and the initial payment of $685,300 was raised from a loan from their mother Madam Fan Po Ying (“Madam Fan”), the balance of the purchase price of $1.2 million was paid by means of a mortgage loan from Po Sang Bank taken out by the two Plaintiffs and the deceased. 3.It is the Plaintiffs’ case that the Plaintiffs and the deceased agreed to be jointly responsible in equal shares to repay the mortgage instalments. It was understood that the 2nd Plaintiff would be responsible for payment of all outgoings, in addition, she would pay the rental of her room at the property assessed at $2,250 per month. She agreed to pay a monthly sum of $750 each to the 1st Plaintiff and the deceased as their share of rental income during her residence at the property. 4.It is the Plaintiffs’ case that the property was purchased for the purpose of investment and pending its sale for profit it would be used by their mother and the 2nd Plaintiff as their residence. 5.It is the Defence case that the deceased took part in the purchase of the property purely to provide accommodations to the 2nd Plaintiff and her mother. The Defendant claimed that the deceased agreed to purchase the property jointly with the Plaintiffs based on a domestic agreement but that agreement ceased to have any effect after the deceased’s death on 23 January 1998. It is further the Defence case that the said domestic agreement was only a family support promise by the deceased; therefore, it is not enforceable against the deceased’s estate. 6.That upon the Defendant Mr. Cho obtaining Letters of Administration on the deceased’s estate in 1999, he had offered to transfer the 1/3 interest held by the deceased’s estate to the Plaintiffs as a gift, however, they had refused the offer. 7.The Defendant counterclaims for 1/3 of the rental received from the property since the deceased’s death, he further applied for an order of sale of the property pursuant to Section 6 of the Partition Ordinance, Chapter 352. 8.The Plaintiffs and the Defendant agreed that the present market value of Lai Kwan Court is $1.2 million. The Issues 9.Mr. Tsui, counsel for the Plaintiffs, concluded the issues in this action to be:
The Plaintiff’s Case 11.The Plaintiffs adduced evidence from the 1st Plaintiff Leung Wai Fong, the 2nd Plaintiff Leung Wai Yi and their mother Madam Fan. The evidence of the Plaintiffs was consistent. That at the end 1995, the two Plaintiffs agreed with their youngest sister, the deceased, to jointly purchase a residential property for investment purpose. In or about early April 1995, they had identified a new development in Castle Peak Road known as Lai Kwan Court as a suitable investment, the unit would be used before the sale for profit by the 2nd Plaintiff and Madam Fan as their residence and a place for the three sisters and their families to meet at weekends. 12.In or about mid-April 1995, the Plaintiffs and the deceased visited Lai Kwan Court and obtained information from the sales office. On the morning of 7 May 1995, the Plaintiffs and the deceased met and agreed to buy a unit in Lai Kwan Court as tenants-in-common, each holding 1/3 share with a down payment borrowed from their mother Madam Fan. They then went to the sales office of Lai Kwan Court and chose a unit; the provisional agreement was then signed. The unit they chose was Flat B 25th Floor Lai Kwan Court and the purchase price was $1,885,300. 13.After the signing of the provisional agreement, they discussed the financial arrangements at a café nearby and worked out rough calculations as to the repayment of the mortgage loan on their investment. 14.On 7 May 1995, they agreed the following:-
15.The Plaintiffs produced as evidence the 7 May 1995 discussion record on which the calculations were worked out (p. 105). It was further the evidence of the Plaintiffs that the sisters had agreed they would not terminate their contributions to the instalment repayments until the sale of the property. 16.Completion of the purchase of the property took place on or about 10 June 1995 when the three sisters executed the assignment and the Po Sang Bank legal charge in the sum of $1.2 million. According to the Plaintiffs, they were advised by the bank that only two of the three sisters were required to be the requesting parties while all three sisters would be named as mortgagors. The bank account No. 070-923-1-019405-1 at the Po Sang Bank Limited was opened in the names of the three sisters for the purpose of settling the monthly instalment repayments to the bank in or about June 1995. The three sisters had since July 1995 each contributed 1/3 to the monthly mortgage repayment instalments to the bank with the adjustment as agreed i.e. the 1st Plaintiff and the deceased would each pay $750 less and the 2nd Plaintiff would pay $1,500 more in her contributions to the monthly mortgage repayments to the bank representing 2/3 of the rental payment for her room at the property. 17.Upon the deceased’s death on 23 January 1998 the monthly contribution of mortgage repayments to the bank were borne solely by the 1st and 2nd Plaintiffs. The bank account passbook in the joint names of the three sisters was eventually replaced by a new account, account No. 070-923-1-0234164, in the two Plaintiffs’ names. The Plaintiffs supplied a copy of the death certificate of the deceased for the bank’s record in order to effect the change. 18.Letters of administration of the deceased’s estate were granted to the Defendant, Mr. Cho, on 30 April 1999. Meanwhile, the two Plaintiffs approached the Defendant for contributions towards the mortgage repayments on the property but to no avail. The Defendant failed to make any contributions after the deceased’s death to date. 19.It is the evidence of Madam Fan that in 1995, she had agreed to lend the sum of $683,300 to her three daughters as part payment on their purchase of the property. The said sum of money represented most of her savings at the time. 20.Before Madam Fan moved into the property, she had been living since 1975 with her mother–in-law at Flat B, 19th Floor, Kwai Fook Building in Kwai Chung, New Territories(“the Kwai Fook flat”). She had contributed part of the purchase price to the Kwai Fook flat. After the death of her mother-in-law, the Kwai Fook flat became registered in the joint names of Madam Fan, her husband Leung Kwan and Madam Li Lai Kuen, his tsip (concubine). In January 1996, the Kwai Fook flat was sold and the proceeds of sale were divided into 3 parts, Madam Fan was given her 1/3 share of $355,911. She kept the said sum in her account at the Standard Chartered Bank. Later in 1997, she transferred about $200,000 of the said sum to the deceased’s account at Hua Chiao Bank; the deceased was to hold the money in her trust because the Hua Chiao Bank was paying a higher rate of interest. 21.Madam Fan confirmed that the deceased informed her of her intention to purchase a residential property jointly with the two Plaintiffs in Lai Kwan Court for the purpose of investment; pending the property’s sale, it would be occupied by the 2nd Plaintiff and Madam Fan and it was intended also for family gatherings at weekends. She visited the sales office of Lai Kwan Court with her three daughters, together they chose a unit. Madam Fan agreed to lend the sum of $683,300 to her three daughters to pay the deposit and part payment on the property. She admitted she understood from her three daughters that they would jointly take up the responsibility of the monthly instalment repayments on the mortgage of $1.2 million to the bank. It was further her understanding that upon the sale of the property, her daughters would return to her the loan of $685,300. Madam Fan further admitted that she had agreed not to charge any interest on the loan. 22.Madam Fan admitted that she had been helping the 1st Plaintiff to look after her children about 1 to 2 days in a week, and at times, she might stay over at the 1st Plaintiff’s home. She, however, insisted that her home was and is at the property which consisted of 2 bedrooms and a living room with kitchen and toilet. 23.Both Plaintiffs admitted that without the agreement that all three sisters would jointly be responsible for the mortgage repayments on the property, they would not have purchased the property. They admitted they were motivated by the fact the 1st Plaintiff’s husband had made a profit in the few years before 1995 from property transactions in the region of $2 million and all three sisters thought they would go into a similar enterprise in the hope that they too would be able to profit from the investment. The Defence Case 24.According to the evidence of the Defendant, Mr. Cho, he had a good relationship with his deceased wife’s family before the deceased’s death on 23 January 1998. The deceased was the youngest of the three daughters of Madam Fan. That even before his marriage to the deceased, the deceased had shared with him all her thoughts on her family and her relationship with her mother and her two elder sisters. It was his understanding that the deceased and the 1st Plaintiff had been paying a monthly maintenance to Madam Fan. Whereas the 2nd Plaintiff though living with the mother had little savings and would seldom contribute to the living expenses of Madam Fan when they were residing at the Kwai Fook flat. Mr. Cho claimed that after his marriage to the deceased the 2nd Plaintiff and Madam Fan became rather unhappy about their stay at the Kwai Fook flat. He believed the reason for their insecurity at the Kwai Fook flat was the shared ownership at the Kwai Fook flat. While her husband and Madam Li resided at a public housing unit in Shatin, Madam Fan had resided at the Kwai Fook flat together with the 2nd Plaintiff with one of the bedrooms in the Kwai Fook flat taken up by the half brothers of the deceased and distant relatives from time to time. They took turns to move in with their families. Mr. Cho claimed that there was an incident where the husband of the deceased’s paternal aunt had moved into the Kwai Fook flat with his teenage son and stayed there for a few months on their visit to Hong Kong from Mainland China. He claimed that the 2nd Plaintiff had suspected the teenager to have tampered with her personal clothing in her absence and she was greatly disturbed by it. Mr. Cho attributed that to be the reason the 2nd Plaintiff and Madam Fan felt a need to seek alternative accommodations in or about 1994 and 1995. 25.Mr. Cho claimed that he was told by the deceased the three sisters and their mother had come to an agreement that the three sisters would jointly purchase the property as tenants-in-common in equal shares to provide a home for the mother and the 2nd Plaintiff. Madam Fan, the Plaintiffs and the deceased would all contribute to the purchase of the property. The mortgage loan repayments was estimated to be around $12,300 a month, and Mr Cho admitted the three sisters had agreed to contribute 1/3 each. The 2nd Plaintiff being a resident at the property would contribute a further sum of $750 each to the 1st Plaintiff and the deceased each month representing 2/3 of a nominal rental of $2,250 per month. The mother and the 2nd Plaintiff would be responsible solely to pay all outgoing expenses such as management fees, electricity and water charges, rates etc. 26.Mr. Cho claimed he was not aware of any discussion concerning the property being sold for profits in future. He further claimed that the deceased was concerned about the wellbeing of her mother and the 2nd Plaintiff and she had informed Mr. Cho that the purchase of the property was her way of showing affection and concern for the 2nd Plaintiff and her mother. He agreed the deceased’s affection for the 2nd Plaintiff was reflected by the life insurance policy taken out by her making the 2nd Plaintiff and Mr. Cho the joint beneficiaries. 27.Mr. Cho admitted he had informed the 1st Plaintiff that he would not be prepared to take up the deceased’s promise and contribute to the mortgage repayments after the deceased’s death nor would the deceased’s estate pay any such contributions. He had offered to hand back the deceased’s 1/3 share in the property to the Plaintiffs without any conditions or considerations. 28.The Defendant claims that he is not obliged to keep the deceased’s promise to support the 2nd Plaintiff and provide her with a residential home contributing 1/3 of the mortgage loan repayments from the deceased’s estate. He asks for the sale of the property at market price and counterclaims for a 1/3 share of the sale proceeds. Findings 29.I have heard the evidence adduced at the trial from the two Plaintiffs, their mother and the Defendant Mr. Cho and observed their demeanour. I have also taken into account the documentary evidence, in particular the record of the three sisters’ calculations during their discussion after they signed the provisional sale and purchase agreement on 7 May 1995 (page 105). It is clear to me that the three sisters agreed on 7 May 1995 to embark on a joint venture investing in a property in their joint names. They were investing in a rising property market, and the property would provide a home for the 2nd Plaintiff and their mother. The 1st Plaintiff has a family with children to look after, the deceased was married to the Defendant with no children and they had a double income. The 2nd Plaintiff was single and living at the Kwai Fook flat with her mother and her stepsiblings. It was quite clear that none of the three sisters would have sufficient savings to pay the down payment on the property; therefore, they enlisted the help of their mother who have saved up a certain sum of money after years of hard work. Madam Fan agreed to lend the sum of $683,000 to her three daughters to purchase the property in their names on the understanding that the loan would be returned to her upon the sale of the property, and with the understanding that she and the 2nd Plaintiff would be residing in those premises before the sale. 30.The Hong Kong property market was on an upward trend in 1995 and 1996. In January 1996, the Kwai Fook flat was sold for the sum of $1,140,200 after Madam Fan and the 2nd Plaintiff moved out of the Kwai Fook flat. Madam Fan received 1/3 of the proceeds of sale in the sum of $355,911. 31.In the circumstances, it is unlikely for the three sisters to sell the property for profit in early 1996 because Madam Fan and the 2nd Plaintiff would have to seek alternative accommodations in a rising market. Although the Plaintiffs claim that Madam Fan could have moved into the public housing unit in Shatin occupied by her husband and Madam Li, it was clearly undesirable and unlikely judging from the fact that she did not move into the public housing accommodation with her husband in 1994. In any event, she had been living separately from Madam Li since the Kwai Fook flat was purchased in 1975. 32.According to the Plaintiffs’ evidence, the value of the property did go up after the purchase in May 1995, but the rise in value was not significant enough to make selling it worthwhile. They had preferred to wait. The deceased died in January 1998 and property prices after 1998 fell dramatically. 33.Upon the death of the deceased in early 1998, the two Plaintiffs had repeatedly negotiated with the Defendant over the matter of the deceased’s share of the mortgage repayment contributions. Mr. Cho, on the other hand, was unwilling to commit to any contributions and in any event, the sale of the property would not be possible before Mr. Cho obtained the grant of Letters of Administration to the deceased’s estate. On 30 April 1999, Mr. Cho obtained the Letters of Administration of the deceased’s estate. 34.The grant of Letters of Administration and the schedule of properties (pages 98 to 100 of the bundle) showed clearly that the deceased left little savings. According to the schedule of properties, she left a 1/3 share in the property valued at $600,000 but she was also assessed to have a debt owing to the Po Sang Bank Limited for a mortgage loan valued at $382,758.62 at the time. Apart from the life insurance payment to the estate of $412,000 odd which presumably was payable upon her death, the largest sum of savings of $220,673.90 was in fact held by her on trust for Madam Fan. Mr. Cho later returned this sum to Madam Fan with interests. 35.Based on the evidence, I find the three sisters went on a joint venture of property investment, they had also intended it to be used by their mother and the 2nd Plaintiff as their residence until it would be convenient for the property to be sold for profit. The fact that the 1st Plaintiff’s husband did make some money from property dealings and the rising property market in Hong Kong in 1995 had motivated the three sisters to go into this joint investment. Each of the three sisters may have her own reasons other than their joint intention of property investment, and that Madam Fan and the 2nd Plaintiff may have wished to live in a self- owned property, it is not disputed that the three sisters did use the property for family gatherings. It was clear that the 1st Plaintiff and the deceased also agreed to provide a secure environment for their mother and the 2nd Plaintiff to live in. I also find that in 1995, all three of them had committed to jointly contribute to the monthly mortgage repayments while Madam Fan agreed to lend the $683,000 required for the down payment. 36.I am satisfied that because of Madam Fan’s loan of $683,000, it was understood that she would live in the property rent-free; in return she would not be charging any interests on the loan. I reject the Defence counsel, Mr. Leung’s suggestion that the loan was meant to be a gift, it is contrary to Madam Fan’s and the Plaintiffs’ evidence, it was clearly intended that the loan would be returned upon the sale of the property. 37.I find Mr. Cho’s evidence on the details of the agreement between the Plaintiffs and the deceased to be unreliable because he was not a party to the agreement. While he may have been present during some of the discussions of the three sisters prior to the purchase, he did not take part in these discussions. He admitted frankly that he was either watching television or involved in other activities during these discussions because he was not a party to the agreement. Most important of all, he was not present at the 7 May 1995 meeting between the deceased and the Plaintiffs and their mother when the agreement was finalised. I am satisfied that what he understood to be the agreement was based on what he was told by the deceased, it may not fully reflect the intentions of the deceased. Mr. Cho, was at the time, a disinterested party, because, on his own admission, the deceased was merely spending her own money and there was no need for her to inform him the full details of her spending. The Law 38.Under Section 64 of the Probate and Administration Ordinance, Chapter 10 Laws Hong Kong, it provides that:-
39.It is the duty of the administrator of the estate to pay all the debts and administration expenses and liability payable from the estate of the deceased. Under Section 64 of the Probate and Administration Ordinance, the debt charged under a legal mortgage on the deceased’s property should be borne by the interest so charged. That means the beneficiary is not liable to pay off the legal charge from his own pocket. 40.Para. 17-013 to 014 of Chitty on Contract Volume 1 provides the following:-
41.The “discharge” referred to in para. 17-014 above was between the bank and the joint and several mortgagors. As to the position between the mortgagors themselves there is an obligation amongst them that the liability to repay the debt is joint and several. In the present case, the three sisters had agreed to jointly contribute to the repayment of the mortgage loan, their positions as joint mortgagors and registered tenants-in-common also required them to do so. This position is known to Mr. Cho because the schedule of properties (p. 99 to 1000) attached to the Letters of Administration clearly set out the deceased had a 1/3 interest in the property with her share of mortgage loan due to Po Sang Bank of $382,758.62. Consequently, the beneficiary to the estate of the deceased would only take the 1/3 interest in the property with the encumbrance of the legal charge on the property. 42.The issue therefore is not whether the agreement between the deceased and the Plaintiffs were enforceable after her death, but whether the administrator of the deceased’s estate had managed the deceased’s estate in such a way that the beneficiary would only take the deceased’s 1/3 interest in the property with the legal charge. 43.On the other hand, although the duty of the administrator of the deceased’s estate is to see to it that the property should be primarily responsible for the charge, Section 64 does not affect the right of the person entitled to the charge to obtain payment out of the other assets of the deceased’s estate (see Section 64(2)). 44.Section 6 of the Partition Ordinance, Chapter 352 states:-
45.Mr. Cho counterclaims for the sale of the property under Section 6 of the Partition Ordinance, he further counterclaims for 1/3 of the proceeds of sale upon discharge of the mortgage loan. Unfortunately, the amount of $117,800 sought by him against the Plaintiffs as the value of the 1/3 interest in the sale proceeds in the property, failed to take into account the loan of $683,000 by Madam Fan. Based on the evidence of the Plaintiffs, I have no doubt it was a promise the three sisters made to Madam Fan at the time of the purchase. Consequently, as the value of the property had been agreed by both parties to be $1.2 million, upon redemption of the mortgage, which now stands at $737,966, there is remaining a proceeds of sale of $462,034. As Madam Fan’s loan of $683,000 has to be repaid upon sale of the property, the Plaintiffs and the deceased’s estate would have to return the loan immediately upon sale. They may apply the balance of the proceeds of sale of $462,034, but the Plaintiffs and the deceased’s estate would still have to come up with the sum of $220,966 in addition to the $462,034. Conclusion 46.I am satisfied an order for sale should be made under S. 6 (1). In coming to this conclusion, I have taken into consideration the nature of the land in question, the number of persons interested, the interest of the mother who had lent to her three daughters over 30% of the purchase price, the need of the mother and the 2nd Plaintiff for suitable accommodations. I am satisfied that the property should be sold at a value of $1.2 million or above; I also order that the two Plaintiffs are allowed to bid at the sale and upon the sale of the property, the proceeds shall be applied to redeem the legal charge, after which, the balance shall be paid to Madam Fan as part of the repayment of the loan. Should there be a shortfall due to the mother on her loan of $683,000, the Plaintiffs and the deceased’s estate shall be equally liable to pay the balance of the debt outstanding to Madam Fan in equal shares. Should the Plaintiffs be successful in their bid at the sale, I am sure a bank would be able to offer them a bridging loan for the sale to be effected. The parties shall have liberty to apply for further directions on the sale, if required. 47.Furthermore, as to the repayment of the mortgage instalments between February 1998 to June 2006 of $977,659.93, the deceased’s estate is liable for 1/3 of the repayments less $750 per month due to the deceased from the 2nd Plaintiff as her share of the rental of $75,750 (101 months at $750 each). The balance of $250,136.64 is outstanding and owing by the deceased’s estate to the two Plaintiffs. I hold the deceased’s estate to be liable to pay to the Plaintiffs this sum on the basis that the deceased’s estate holds a 1/3 interest in the property and the deceased was one of the three mortgagors named and a requesting party to the Po Sang Bank legal charge on the property. Costs 48.Costs to follow the event. The Plaintiff’s costs shall be borne by the Defendant, to be taxed if not agreed with Certificate for Counsel. The order nisi will be made absolute should the parties failed to apply with 14 days hereof.
Mr. Raymond Tsui instructed by Messrs. Deca Lin & Partners for the 1st and 2nd Plaintiffs. Mr. Richard Leung and Mr. King Wong instructed by Messrs. Chow & Ho for the Defendant. |